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Budget reaction: The impact on local government

Paul Dossett, Head of Local Government at Grant Thornton UK LLP, commented:

"With less than two weeks to go before Parliament is dissolved and less than two months before the public pass their judgement at the ballot box, this Budget fired the starting gun on what will be the most difficult to predict general election in a generation.

"The Chancellor confirmed the announcement made earlier this week by Danny Alexander of a review of the business rates system in England. The review will examine the sustainability of the current system - which was introduced nearly 30 years ago – and how business rate retention by councils can incentivise growth. The Chancellor also announced agreement for the Greater Manchester Combined Authority and Cheshire East to retain 100% of business rate growth from next month, to add to the Cambridgeshire pilot announced earlier this week.

"We welcome the planned business rates review and hope that it will be radical, considering how business rates can better reflect the modern economy – not necessarily based on property values - as well as incentivising cities and local authorities to support and not hinder business growth. This should include full devolution to local authorities to provide them with the freedom to generate revenue to invest in local services and assets, enabling local decision making and accountability, but with appropriate safeguards to support more deprived localities and to avoid unnecessary tax competition.

"In his speech the Chancellor stated that the north of England is growing faster than the south. The most recent Grant Thornton/ICAEW Business Confidence Monitor showed that, unlike the rest of the UK, business confidence held steady at the start of 2015 in Northern England and Yorkshire and Humber, perhaps buoyed by stronger export performance than the rest of the UK. These encouraging signs are a further demonstration of the importance of devolution to city regions and investment in the infrastructure of the Northern Powerhouse.

"The Chancellor confirmed the recent NHS devolution announcement for the Greater Manchester Combined Authority and plans for an elected mayor, which he called the most exciting development in civic leadership for a generation. He also confirmed the devolution announcement for the West Yorkshire Combined Authority, with additional powers relating to skills, transport and business support.

"We welcome further commitments to empowering city regions, particularly on skills and  transport; such as investment in coast-to-coast transport connectivity in the North; and to look at ways of expanding international flights from regional airports such as Manchester.

"The Chancellor confirmed that the administration costs of central government had fallen by 40% during the lifetime of this parliament. Some pre-election coverage suggested the Chancellor may announce modifications to the depth of cuts planned during the next parliament. However, he stuck to the additional £30billion savings previously announced. Of this, £13billion will be met by government departments (with £12billion from welfare and £5billion from tax avoidance/evasion) but it remains unclear how much of this will be borne by local government. However, the key message today on public finances is that a surplus is forecast during 2019/20 and that public spending will then grow in line with growth in the economy. This offers a glimmer of light at the end of the tunnel for public services.

"On a more positive note, the Chancellor confirmed an additional £1.25 billion for mental health services in England, trailed by Nick Clegg at the recent Liberal Democrats spring conference. More broadly, many in the sector will be disappointed that the LGA's hoped for ring-fencing of social care budgets, to protect them from further cuts, did not feature in the Chancellor's statement, although commitments are given in the Budget Book to explore further integration of health and social care budgets at a local level, going beyond the Better Care Fund.

"A final word of caution. Given the unpredictability of the outcome of May's general election, it is likely that there will be an emergency budget following the formation of the next Government -  particularly if there is a new Chancellor in place -  which could see today's Budget plans amended or overturned."